China’s trade balance shrank in December
2023.01.13 02:02
China’s trade balance shrank in December
By Ray Johnson
Budrigannews.com – China’s exports fell sharply in December as global demand slowed, raising concerns about the country’s economic recovery this year. However, a smaller drop in imports bolstered expectations that domestic demand will slowly recover in the months to come.
China’s exports are anticipated to weaken well into the new year as the global economy teeters on the edge of recession, despite the fact that imports are anticipated to ride a wave of pent-up demand following the country’s December withdrawal from its stringent COVID-19 measures.
According to Zhiwei Zhang, chief economist at Pinpoint Asset Management, “The weak export growth highlights the importance of boosting domestic demand as the key driver for the economy in 2023,” markets anticipate Beijing to announce additional policies to support consumption.
Friday’s customs data showed that exports fell 9.9% year-over-year in December, following a drop of 8.7% in November, but that the decline was still slightly above expectations. The decline was the worst it had been since February 2020.
Outbound shipments to the United States fell 19.5% in December, while those to the EU fell 17.5%, according to Reuters’ calculations based on official data. This shows that global demand is slowing down.
China’s total exports increased by 7% in 2022 due to its strong trade with Southeast Asian nations and an export boom of new energy vehicles, despite the sharp drop in shipments over the past few months. However, growth was still a far cry from the gain of 29.6% in 2021.
Last month, imports decreased by 7.5 percent, less than the predicted 9.8 percent decline and less than the 10.6 percent decline in November.
Compared to $670.4 billion in 2021, China’s trade surplus in 2022 reached an all-time high of $877.6 billion, the highest since records began in 1950.
Beijing’s plans for economic recovery will depend heavily on increasing domestic consumption, and there is a lot of ground to make up: imports increased only 1.1% in 2018, a sharp decline from 30% growth in 2021.
In December, China decreased its coal purchases as industrial activity slowed due to an increase in COVID-19 infections.
Since they want to support growth and lessen the disruptions brought on by the sudden end to COVID-19 curbs, policymakers have pledged to boost economic support.
Imports of industrial materials like copper and iron ore could be boosted by measures to ease a crippling funding crunch in the real estate sector.
Oxford Economics senior economist Lloyd Chan anticipates increased support for property developers and households, despite the fact that net trade is still likely to hinder China’s growth this year.
Given the ongoing COVID surge and weak domestic sentiment, “any near-term lift is unlikely.”
On Thursday, China’s commerce ministry stated that “arduous tasks” remain due to the country’s trade stabilization being hampered by slowing external demand and rising global recession risks.
A sub-index of new export orders has been in contraction territory for 20 consecutive months, according to an official factory activity survey.
However, the ministry stated that major exporting provinces have noticed an improvement in their ability to acquire new orders. Anti-virus restrictions that caused port logistics to be disrupted and factories in important manufacturing hubs to be shut down have finally been lifted by Chinese authorities after three years.
According to a Reuters poll, analysts expect China’s economic growth to return to 4.9 percent in 2023 before stabilizing in 2024.
In the face of widespread lockdowns in 2022, the economy is likely to expand by just 2.8%, well below the official target of 5.5%. On January 17, GDP (gross domestic product) data for the fourth quarter and 2022 will be released.
Kristalina Georgieva, the managing director of the IMF, stated on Thursday that she expected China to become a net contributor to the global economy by the middle of 2023 and urged Beijing to continue reversing its zero-COVID policy.
Bank of America (NYSE) analysts: China’s consumption is expected to rebound “faster and sharper” than that of the rest of Asia.
However, some manufacturers are still wary of the prospects.
Jin Chaofeng, whose company exports outdoor rattan furniture from the east coast city of Hangzhou, stated that he has no plans for hiring or expanding his market in 2023.
He stated, “With the lifting of COVID curbs, domestic demand is expected to improve, but exports will not.”
Jin stated, “With no signs of the end of the Russia-Ukraine war or crucial improvement in China-U.S. relations, this year’s exports may be worse than 2022,” adding that his business has been reducing inventory over the past few months.
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